Yesterday the Ninth Circuit affirmed the denial of a motion to compel arbitration where the arbitration agreement was part of a “browsewrap” agreement. Nguyen v. Barnes & Noble Inc., No. 12-56628, __ F.3d __ (N.D. Cal. Aug. 18, 2014). The motion arose in a putative class action relating to a cancelled order for a Hewlett-Packard Touchpad on the Barnes & Noble website. Id. at *4. The browsewrap agreement was contained in the site’s Terms of Use, which was available via a link at the bottom left-hand corner of every page of the website. Id. at *5. The Terms of Use link also appeared either directly below the relevant button a user must click on to proceed in the checkout process or just a few inches away. Id. at *13. (“Unlike a clickwrap agreement, a browsewrap agreement does not require the user to manifest assent to the terms and conditions expressly . . . [a] party instead gives his assent simply by using the website.” Id. at *9-10 (citing Hines v. Overstock.com, Inc., 668 F. Supp. 2d 362, 366–67 (E.D.N.Y. 2009).)

The panel held that the plaintiff had insufficient notice of the terms of use, and thus did not enter in an agreement to arbitrate.

[W]here, as here, there is no evidence that the website user had actual knowledge of the agreement, the validity of the browsewrap agreement turns on whether the website puts a reasonably prudent user on inquiry notice of the terms of the contract. . . . Whether a user hasinquiry notice of a browsewrap agreement, in turn, depends on the design and content of the website and the agreement’s webpage. . . . Where the link to a website’s terms of use is buried at the bottom of the page or tucked away in obscure corners of the website where users are unlikely to see it, courts have refused to enforce the browsewrap agreement.

Id. at *11-12 (internal citations omitted).

The court noted that there was no evidence that the plaintiff had actual knowledge of the agreement. “[T]he proximity or conspicuousness of the hyperlink alone is not enough to give rise to constructive notice . . . .” Id. at *14.

[W]e therefore hold that where a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on—without more—is insufficient to give rise to constructive notice. While failure to read a contract before agreeing to its terms does not relieve a party of its obligations under the contract, Gillman v. Chase Manhattan Bank, N.A., 73 N.Y.2d 1, 11 (1988), the onus must be on website owners to put users on notice of the terms to which they wish to bind consumers. Given the breadth of the range of technological savvy of online purchasers, consumers cannot be expected to ferret out hyperlinks to terms and conditions to which they have no reason to suspect they will be bound.

At the request of the Ninth Circuit, the Court considered whether an employer may attribute commission wages paid in one pay period to other pay periods in order to satisfy the requirements of California’s commissioned sales exemption.

The court concluded that it may not:

[A]n employer satisfies the minimum earnings prong of the commissioned employee exemption only in those pay periods in which it actually pays the required minimum earnings. An employer may not satisfy the prong by reassigning wages from a different pay period.

Today the U.S. Supreme Court issued its opinion in American Express Co. v. Italian Colors Restaurant, No. 12-133, 570 U.S. __ (June 20, 2013). The Court considered whether a contractual waiver of class arbitration is enforceable under the Federal Arbitration Act (“FAA”) when the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery. The Court held that it was.

“Respondents argue that requiring them to litigate their claims individually—as they contracted to do—would contravene the policies of the antitrust laws. But the antitrust laws do not guarantee an affordable procedural path to the vindication of every claim.” Slip Op. at 4.

No civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be submitted to final and binding arbitration in New Jersey, pursuant to the rules of the American Arbitration Association with one arbitrator.

Slip Op. at 2.

The state court granted Oxford’s motion to compel arbitration, and the parties agreed that the arbitrator should decide whether their contract authorized class arbitration. Id. The arbitrator determined that it did. Id. Oxford filed a motion in federal court to vacate the arbitrator’s decision on the ground that he had exceeded his powers under §10(a)(4), but the District Court denied the motion, and the Third Circuit affirmed. Id.

While the arbitration proceeded, the Supreme Court Court held in Stolt-Nielsen that “a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the party agreed to do so.” 559 U. S. at 684. The parties in Stolt-Nielsen had stipulated that they had never reached an agreement on class arbitration.

The question presented in this case is whether the Federal Arbitration Act (9 U.S.C. §§ 1-16) (FAA) permits arbitration agreements to override the statutory right to bring representative claims under the Labor Code Private Attorneys General Act of 2004 (PAGA). (Lab. Code, § 2698 et seq.) We conclude that the FAA does not demand enforcement of such an agreement. A plaintiff suing for PAGA civil penalties is suing as a proxy for the State. A PAGA claim is necessarily a representative action intended to advance a predominately public purpose. When applied to the PAGA, a private agreement purporting to waive the right to take representative action is unenforceable because it wholly precludes the exercise of this unwaivable statutory right. AT&T Mobility LLC v. Concepcion (2011) 131 S.Ct. 1740 (Concepcion) does not require otherwise.

Yesterday, in Vargas v. SAI Monrovia B, Inc., No. B237257, __ Cal. App. 4th __ (2d Dist. June 4, 2013), a putative class action, the Second District revisited its holding in Sanchez v. Valencia Holding Co., LLC, 201 Cal.App.4th 74 (2012), review granted March 21, 2012, S199119. In Sanchez the court held that a “Retail Installment Sale Contract” used to purchase an automobile is unconscionable and unenforceable. In Vargas, the court again concluded that the identical sale contract does not require the arbitration of disputes between a purchaser and a car dealer because it is permeated by unconscionability.

The arbitration provision, entitled, “ARBITRATION CLAUSE,” was on the back at the bottom of the page, outlined by a black box; the arbitration provision was the last provision in the Sale Contract concerning the purchase of the vehicle; a provision related to the assignment of the contract appeared below it. The buyers’ final signatures appeared near the bottom of the front side. The only signature line on the back was at the very bottom of the page; it required the seller’s signature to assign the contract to a third party.

Slip Op. at 3.

The court found that the arbitration provision satisfies the two elements of procedural unconscionability: oppression and surprise. Read the rest of this entry »

In a meal and rest break class action, the Fourth District on Friday reversed the denial of certification of a class of security guards. Faulkinbury v. Boyd & Associates, Inc., No. G041702, __ Cal. App. 4th. __ (4th Dist. May 10, 2013). Reconsidering in light of the California Supreme Court decision in Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004 (2012), the court concluded that the primary issue was the legality of certain company policies, which could be determined on a class-wide basis, even if the application of the policies varied by individual.

Yesterday, in an appeal from a dismissal of a class action, the Second District held that a non-noticing party in a deposition, who does not move for an order in the pending case for a determination of the “reasonable rate” a court reporter may charge, may not bring a subsequent action to obtain restitution or obtain injunctive relief. The Las Canoas Company, Inc. v. Kramer, No. B238729, __ Cal. App. 4th. __ (2d Dist. May 7, 2013). California Code of Civil Procedure section 2025.510 provides that “any other party or the deponent, at the expense of that party or deponent, may obtain a copy of the [deposition] transcript.” In a prior action, the court reporter quoted a rate of $2 per page, totaling $16,000 for 8,000 pages. Slip Op. at 2. Las Canoas offered to pay a $30 flat rate in exchange for a computer disc containing uncertified copies of the transcripts and exhibits. The court reporter did not agree, but Las Canoas did not challenge the court reporter’s rate until filing a subsequent class action.

The trial court in the subsequent case sustained a demurrer to the putative class action complaint, holding that it lacked “subject matter jurisdiction” since La Canoas failed to bring a motion in the prior case.

In a wage and hour class action, the Second District articulated today a “clear and unmistakable” standard for waiver of right to immediate payment of vested vacation time under the collective-bargaining exception to Labor Code section 227.3. Choate v. Celite Corporation, No. B239160, __ Cal. App. 4th __ (2d Dist. May 2, 2013). However because Choate was the first case to define this standard, the Court found defendant did not act unreasonably, and reversed waiting time penalties under Labor Code section 203:

Although we agree with the trial court that this is the appropriate standard, this is the first case to define the standard for waiver under section 227.3. Plaintiffs argue that Saustez decided this issue, but it did not. (Saustez, supra, 31 Cal.3d 774.) Celite’s good faith reliance on a different waiver standard was accordingly reasonable, particularly in light of the language in Firestone supporting that standard. [Internal citation omitted.] That Celite’s position did not prevail does not mean that its position was unreasonable. (8 Cal. Code Regs., § 13520.)

The Second District held today that it is an abuse of discretion to permit an amendment to a complaint on the fourth day of a five-day trial. Duchrow v. Forrest, __ Cal. App. 4th __, No. B233736 (2d Dist. Apr. 30, 2013). The Court found that there was no reason the amendment could not have been made sooner, and that prejudice existed because, among other things, the amendment “changed the damages sought from $44,082.22, as pleaded in the complaint, to $312,260 in attorney fees and $16,851.95 in costs under the Litigation Agreement, plus an additional $27,777.36 in attorney fees and $8,155.13 in accrued interest under the Administrative Agreement, for a total of $365,044.44.”